S TA N F O R D I N T E R N AT I O N A L B A N K

No. 11 Pavilion Drive

2005 ANNUAL REPORT

St. John’s, Antigua, West Indies
p. 268-480-3700
www.stanfordinternationalbank.com

A member of the Stanford Private Wealth Management global network.

20 YEARS, $4 BILLION IN TOTAL ASSETS AND WE STILL SERVE OUR FIRST CLIENT.
TABLE OF CONTENTS

Financial Highlights 25
Chairman’s Letter 22
Income Statement 24
Balance Sheet 25
Statement of Changes in Equity 26
Statement of Cash Flows 27
Notes to the Financial Statements 28
Auditors’ Report 50
Report of Management 51
 “Since 1985 we have witnessed and

adapted to ever-changing global market

environments while providing our
clients a level of service that has set us
apart from other international banks
and has created satisfaction and trust
reaching far beyond the traditional
private banking relationship.”
R. Allen Stanford
Chairman and CEO

4
FINANCIAL HIGHLIGHTS
(Expressed in thousands of United States dollars)
Year Ended 31 December 2005

2005 2004 2003

RESULTS
TOTAL REVENUE (see Figure 1) $ 431,731 $ 331,890 $ 254,463
Interest Paid to Clients 220,792 161,677 134,019
Fees and Operating Expenses 175,028 133,999 87,323
Total Expenses 395,820 295,676 221,342

EARNINGS $ 35,911 $ 36,214 $ 33,121

CAPITAL
Shareholder’s Equity $ 282,454 $ 246,543 $ 135,029
Percent of Total Assets* 6.96% 7.99% 6.07%
Percent of Total Client Deposits* 7.51% 8.72% 6.48%

YEAR-END BALANCES
TOTAL ASSETS (see Figure 2) $ 4,059,114 $ 3,086,421 $ 2,225,506
TOTAL DEPOSITS (see Figure 2) $ 3,763,011 $ 2,827,941 $ 2,083,398

*Based on year-end equity as a percentage of year-end balances of assets and client deposits.

Figure 1. REVENUES Figure 2. ASSETS AND DEPOSITS

Dollars (in millions) Dollars (in billions)

500

450 4.5
432
4.1
400 4.0 3.8

350 3.5
332
3.1
300 3.0 2.8
254
250 2.5
2.2 2.1
200 2.0

150 1.5

100 1.0

50 0.5

0 0
2003 2004 2005 2003 2004 2005

Total Assets Total Deposits

5
 OUR FOCUS AND PRIORITIES

We have successfully built Stanford International Bank (SIB) into an institution that is second to none because our
focus and priorities have never changed.

Unlike other international banks serving many different types of clients and many different market segments with a
myriad of products and services, SIB has focused on a very select client profile and a very select product line.

6
“As the connection between

the outside world and SIB,

it’s important that I make
callers and visitors feel
welcome. Once they have
that level of comfort and
security, everything else
falls into place.”
Melinda Fletcher
Senior Receptionist
8
BEST OF THE BEST

We have employed the best of the best in human talent from around the globe in the international banking and financial
services industries. These top caliber men and women who proudly wear our eagle pin are totally committed to
providing our clients with a level of service that is second to none.

“I feel that one of the biggest

strengths of the Bank is our

team. I’ve never worked with
such a wonderful group of
people. I’m really impressed with
their skill, experience, discipline
and attention to detail.”
Jennifer Roman
Human Resources
Manager

9
10
“The Bank is domiciled in a well-regulated, low-tax jurisdiction and as

a member of the Stanford Financial Group, we are well-positioned to

meet the private banking needs of our affluent clients.”
Eugene Kipper
Vice President

11
 OUR INVESTMENT PHILOSOPHY

We believe value investing combined with a thoroughly understood and well-managed alternative strategy is the
foundation from which all long-term investment success is built.

Our investment philosophy may not produce dazzling returns and does not always follow current trends, but we have
proved year after year it consistently protects principal and grows capital.

“SIB’s investment policy of absolute

yields combined with a long-term

core strategy has resulted in two
decades of solid performance.”
Michael Zarich
Vice President and
Senior Investment Officer

12
“We manage risk by keeping

the Bank’s investments

globally diversified across
different economic sectors
and asset classes with
prudent ROI expectations.”
Miguel Pacheco
Senior Vice President
OUR RISK MANAGEMENT STRATEGY

SIB employs an investment strategy with the goal of minimizing systematic and unsystematic risk, while maintaining more
than adequate liquidity, portfolio efficiency, operational flexibility and absolute yields as opposed to index-benchmark
yields. Our return-on-investment expectations are realistic and based on as much knowledge and information as we can
obtain on a firsthand basis. In many instances this simply means rolling up our sleeves to do the hard work necessary in
order to make sound investment decisions.

15
 “I have been with SIB for over 12 years and have seen

our transactional flow increase dramatically during this

period. Today we serve in excess of 35,000 clients in
102 countries and I am proud to say that the quality of
service we provide has only improved.”
Beverly Jacobs
Operations Manager

16
17
 BUILDING RELATIONSHIPS

After two decades of serving our clients we know that no matter how technological our world becomes, nothing will ever
replace the human touch in building and maintaining the client relationship.

“Our commitment to serve the Bank’s

clients is supported by a continuing

investment in technology and our
physical plant, but what really makes
the difference is the team spirit and
dedication everyone brings to this task.”
Amanda D’Ornellas
Client Services Manager

18
19
 THE FUTURE

For 20 years SIB has consistently delivered a premium return to our clients on their deposits, combined with true
world-class private banking service. By staying true to our principles of hard work, clear vision and value for the
client we look optimistically to the next two decades of success and growth.

“SIB is successful because we strictly

adhere to our fundamentals and strive

for excellence in everything we do.”
Juan Rodriguez-Tolentino
President

20
21
 CHAIRMAN’S LETTER
2005 was another successful year of growth, productivity and profit for Stanford International Bank, as total assets
surpassed $4 billion at year’s end. Our ability to attract the best talent in the financial services industry, the addition
of new cutting-edge technology and our consistent profitability all speak volumes as to the Bank’s firm foundation for
the future.

However, before I highlight our achievements during 2005 and plans for the future, I am compelled to look back to the
Bank’s beginning 20 years ago.

In 1985 there was no Internet, computers were only just beginning to enter the workplace, cell phones were virtually
nonexistent and fax machines, then called telecopiers, were in limited use. It’s hard to fathom our world today without
these tools at our fingertips and we can only imagine where the next 20-year leap of technology will take us.

Likewise, during the past 20 years we have witnessed an array of different economic and political events. In October of
1987, we experienced the worst stock market decline since the Great Depression. In 1990, the United States went into a
major recession. During the next few years, we saw the Mexican peso crisis of 1994, the Asian crisis of 1997, the Russian
crisis of 1998 and the collapse of long-term capital. Speculation in technology stocks drove the NASDAQ over 5,000 for
the first time in March 2000, and this exuberance carried over into the Dow, prompting it to break the 11,000 mark. The
sharp rise in Internet stocks led to the eventual bursting of the Internet stock bubble that same year with a staggering
78 percent market decline as measured by the NASDAQ Composite. The following year, major corporate scandals
further added to market volatility. The events of 11 September 2001 not only impacted the world’s markets but have
significantly changed the way we now conduct international banking business. Economic problems in Argentina took
center stage in 2002 when the government defaulted on its debt. The integration process of Western Europe was
greatly accelerated with the introduction of the Eurocurrency in 1999 and its implementation in 2002, and although
many nationalistic issues remain to be solved, the European Union is now a reality. There is no doubt that China and
India are altering the global investment climate in a manner that will continue to mold and shape the world’s economic
base for decades to come. Also, looking back over the past 20 years, it is mind-boggling to reflect on the number of
worldwide mergers and acquisitions that have taken place in the international banking and financial services arena.

To say the world has changed dramatically over the past two decades would be an understatement. And serving a
global base of increasingly sophisticated clients today requires skill and experience; a constant dedication to staying
abreast of the latest in technology, regulatory requirements, tax laws and compliance mandates; and keeping a finger
on the pulse of a multitude of social and economic issues.

Amidst all of this change, however, our principles of hard work, clear vision and value for the client have remained
constant and are still as applicable today as they were in 1932 when my grandfather founded our first Stanford
company. This is one of the reasons that our very first client remains with the Bank to this day, and what continues to
earn us the loyalty of those who place their confidence and trust in us year after year.

Our board of directors and advisors, most of whom have been with the Bank throughout its 20-year history, have been
instrumental in our success. They will continue to play a key role in our future successes and I look forward to working
with all of them in the years ahead.

I would like to express my eternal gratitude to our Bank’s chairman emeritus, my father — James A. Stanford — for his
wisdom and vision during our first decade of operation. What was built during those formative years was a strong
foundation upon which we have now built a world-class, international private banking institution.

22
I am most proud, though, of the Bank’s top management and support staff, who in my opinion are without equal in terms
of ability, loyalty and work ethic. On behalf of the board of directors, I want to thank Juan Rodriguez-Tolentino, president
of SIB, and his entire team for working so diligently day after day, flawlessly managing our Bank’s growth.

INTERNATIONAL FINANCIAL REPORTING STANDARDS

To meet changes in International Financial Reporting Standards and to be compliant with new requirements soon to be
implemented by the Financial Services Regulatory Commission, we made significant changes in the presentation of our
financial statements for 2005. The changes seek to standardize reporting worldwide and improve the information
presented on the Bank’s financial position. The Bank is also preparing for full implementation of Basel II.

FINANCIAL PERFORMANCE 2005

The Bank achieved strong growth in assets and deposits in 2005. Assets totaled $4.1 billion, up 31.5 percent over 2004;
this represents an increase of nearly $1 billion over the previous year. Deposits increased 33.1 percent to $3.8 billion in
2005. The Bank’s operating profit was $35.9 million, slightly down from the 2004 record profit of $36.2 million.

Total revenues for the year were $431.7 million, an increase of 30.1 percent over the previous year. Investment income for
the year was $339.2 million, or 78.6 percent of total revenue, and $61.9 million, or 22.3 percent, greater than 2004. Interest
income of $86.3 million represented approximately 20.0 percent of total revenue, an increase from $56.8 million in 2004.

Interest paid to depositors for 2005 was $220.8 million, 36.6 percent greater than the $161.7 million paid in 2004. Referral
fees increased by 37.8 percent to $87.8 million, and management fees increased to $74.5 million, or 25.4 percent over the
prior year.

Our cash balances increased to $257.5 million, or 29.6 percent over last year and represented 6.8 percent of client
deposits. Financial assets at fair value increased $906.7 million to $3.8 billion, a 31.9 percent increase from 2004. As of 31
December 2005, shareholder’s equity increased to $282.5 million, up 14.6 percent from $246.5 million on 31 December 2004.

THE FUTURE
We have come a long way since our beginning in 1985. From a few hundred clients in a handful of countries and a small,
but talented staff of hardworking employees, we have grown into a multibillion-dollar institution that today serves over
35,000 clients in 102 countries around the globe. We have expanded our physical plant five times during this period,
brought on many new “best of the best,” Stanford-quality international banking professionals and have basically
reinvented ourselves through technology seven times. We will continue this process because with growth and evolution
comes change, and although our balance sheet in 2005 dwarfs the Bank’s modest beginnings in 1985, in many ways I feel
that we are just starting to build an institution that has unlimited potential and an incredibly bright future. I confidently
make this bold statement simply because we have never lost our way along this 20-year journey. We understand where
we came from, what our principles are and that the only reason we come to work every day is to serve you, our clients.

I promise you will never find any bank more committed to helping you achieve your goals than SIB. And we will not
become diluted in this endeavor as we continue to grow and expand our market reach around the globe.

On behalf of the board of directors, management and all of our employees, I want to thank you, our clients, and your
families for the trust and loyalty you have demonstrated over these past two decades.

Yours truly,

R. Allen Stanford
Chairman

23
INCOME STATEMENT
(Expressed in United States dollars)
Year Ended 31 December 2005

NOTE 2005 2004

OPERATING INCOME
5 NET INVESTMENT INCOME $ 339,195,455 $ 277,260,077

Interest Income 86,283,957 56,777,489

Interest Expense 220,791,640 161,677,476
6 NET INTEREST INCOME/(EXPENSE) $ (134,507,683) $ (104,899,987)

Fee Income 1,230,131 736,597

Fee Expense 88,635,509 64,327,602
7 NET FEE INCOME/(EXPENSE) $ (87,405,378) $ (63,591,005)

8 Other Income 5,021,143 (2,884,431)

TOTAL OPERATING INCOME (see Figure 3) $ 122,303,537 $ 105,884,654

OPERATING EXPENSES
9 Personnel Expenses 2,460,181 2,099,423
10 General and Administrative Expenses 83,029,691 66,691,773
14 Depreciation of Property and Equipment 902,431 879,481
TOTAL OPERATING EXPENSES $ 86,392,303 $ 69,670,677

OPERATING PROFIT (see Figure 4) $ 35,911,234 $ 36,213,977

The notes on pages 28 to 49 are an integral part of these financial statements.

Figure 3. OPERATING INCOME Figure 4. OPERATING PROFIT

Dollars (in millions) Dollars (in millions)

36.2 35.9
140 35 33.1
122
120 30
106
100 25

80 73 20

60 15

40 10

20 5

0 0
2003 2004 2005 2003 2004 2005

24
BALANCE SHEET
(Expressed in United States dollars)
At 31 December 2005

NOTE 2005 2004

ASSETS
11 Cash and Balances with Other Banks $ 257,474,934 $ 198,704,189
12 Financial Assets at Fair Value 3,753,765,105 2,847,066,953
13 Loans and Advances to Clients 38,448,848 28,342,780
14 Property and Equipment 4,599,287 7,196,931
15 Other Assets 4,825,613 5,110,607
TOTAL ASSETS $ 4,059,113,787 $ 3,086,421,460

LIABILITIES AND SHAREHOLDER’S EQUITY

16 Deposits from Clients (see Figure 5) 3,763,011,040 2,827,941,493
17 Other Liabilities and Provisions 13,648,917 11,937,371
TOTAL LIABILITIES $ 3,776,659,957 $ 2,839,878,864

18 Share Capital 10,000,000 10,000,000

18 Share Premium 103,500,000 103,500,000
19 Retained Earnings (see Figure 6) 168,953,830 133,042,596
TOTAL SHAREHOLDER’S EQUITY (see Figure 6) $ 282,453,830 $ 246,542,596

TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY $ 4,059,113,787 $ 3,086,421,460

The notes on pages 28 to 49 are an integral part of these financial statements.

Figure 5. DEPOSITS FROM CLIENTS Figure 6. EARNINGS AND EQUITY

Dollars (in billions) Dollars (in millions)

4.0
3.8
3.5

3.0 2.8 300 282

2.5 250 247

2.1
2.0 200
169
1.5 150 135 133

1.0 100 97

0.5 50

0.0 0
2003 2004 2005 2003 2004 2005

Retained Earnings Shareholder’s Equity

25
STATEMENT OF CHANGES IN EQUITY
(Expressed in United States dollars)

Total
Share Capital Share Premium Retained Earnings Shareholder’s
Equity

At 31 December 2003 $ 10,000,000 $ 28,200,000 $ 96,828,619 $ 135,028,619

Additional Contributions 0 75,300,000 0 75,300,000
Net Income for the Year 0 0 36,213,977 36,213,977

AT 31 DECEMBER 2004 $ 10,000,000 $ 103,500,000 $ 133,042,596 $ 246,542,596

Additional Contributions 0 0 0 0
Net Income for the Year 0 0 35,911,234 35,911,234

AT 31 DECEMBER 2005 $ 10,000,000 $ 103,500,000 $ 168,953,830 $ 282,453,830

The notes on pages 28 to 49 are an integral part of these financial statements.

26
STATEMENT OF CASH FLOWS
(Expressed in United States dollars)
Year Ended 31 December 2005

NOTE 2005 2004

CASH FLOWS FROM OPERATING ACTIVITIES

5 Investment Income $ 339,195,455 $ 277,260,077
6 Interest Received 86,283,957 56,777,489
6 Interest Paid (220,791,640) (161,677,476)
7 Fees Received 1,230,131 736,597
8 Other Income 5,021,143 (2,884,431)
Cash Payments to Employees and Suppliers (174,125,381) (133,118,798)
Cash Flows From Operating Profits $ 36,813,665 $ 37,093,458

CHANGES IN OPERATING ASSETS AND LIABILITIES

12 Net Increase in Financial Assets at Fair Value (906,698,152) (765,574,653)
13 Net Increase in Loans and Advances to Clients (10,106,068) (4,122,456)
15 Net Decrease in Other Assets 284,994 158,224
16 Net Increase in Deposits from Clients 935,069,547 744,543,495
17 Net Increase in Other Liabilities 1,711,546 4,857,963
NET CASH FLOWS FROM OPERATING ACTIVITIES $ 57,075,532 $ 16,956,031

CASH FLOWS FROM INVESTING ACTIVITIES

14 Purchase of Property and Equipment (398,135) (2,485,049)
14 Proceeds from Sale of Property and Equipment 2,093,348 27,822
NET CASH FLOWS FROM INVESTING ACTIVITIES $ 1,695,213 $ (2,457,227)

CASH FLOWS FROM FINANCING ACTIVITIES

18 Contribution to Share Premium Account 0 75,300,000
NET CASH FLOWS FROM FINANCING ACTIVITIES $ 0 $ 75,300,000

Net Increase in Cash and Cash Equivalents 58,770,745 89,798,804

CASH AND EQUIVALENTS AT BEGINNING OF YEAR $ 197,704,189 $ 107,905,385

11 CASH AND EQUIVALENTS AT END OF YEAR (see Figure 7) $ 256,474,934 $ 197,704,189

The notes on pages 28 to 49 are an integral part of these financial statements.

Figure 7. CASH AND EQUIVALENTS

Dollars (in millions)

300
256
250

200 198

150
108
100

50

0
2003 2004 2005

27
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States dollars)

NOTE 1 - GENERAL INFORMATION

Stanford International Bank (“the Bank”) provides private banking services to the international market. The Bank has more than 35,000
clients from 102 countries around the world. The Bank is registered under the International Business Corporation Act No. 28 of 1982 as
amended (“the Act”). The Bank’s activities are governed by the Act and by every other act currently in force concerning international
business corporations and affecting the corporation in Antigua and Barbuda. The Bank is also regulated by the Financial Services
Regulatory Commission (FSRC). International banks are subject to annual audits, regulatory inspections and licensing requirements by
this body. The supervisory authority for money laundering and other financial crimes is the Office of the National Drug Control and
Money Laundering Policy (ONDCP). The FSRC and ONDCP, although independent, work closely together.

These financial statements have been approved for issue by the board of directors on 28 April 2006.

NOTE 2 - ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been
consistently applied to all years presented unless otherwise stated.

2.1 BASIS OF PRESENTATION

Stanford International Bank’s financial statements have been prepared in accordance with International Financial Reporting Standards
(IFRS). The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial
assets held at fair value through profit or loss and all derivative contracts.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Bank’s accounting policies. The areas involving a higher
degree of judgement or complexity, as well as areas in which assumptions and estimates are significant to the financial statements, are
disclosed in Note 4.

The Bank is adopting the following IFRS, which are relevant to its operations. All other standards do not currently apply to the Bank’s
operations. As required, the 2004 accounts have been amended in accordance with the relevant requirements.

IAS 01 Presentation of Financial Statements

IAS 07 Cash Flow Statements
IAS 08 Accounting Policies, Changes in Accounting Estimates and Errors
IAS 16 Property, Plant and Equipment
IAS 18 Revenue
IAS 21 The Effects of Changes in Foreign Exchange Rates
IAS 24 Related Party Disclosures
IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions
IAS 32 Financial Instruments: Disclosure and Presentation
IAS 36 Impairment of Assets
IAS 37 Provisions, Contingent Liabilities and Contingent Assets
IAS 39 Financial Instruments: Recognition and Measurement

All changes in the accounting policies have been made in accordance with the transition provisions in the respective standards. There
was no impact to the opening retained earnings at 1 January 2004 from the adoption of any of the above-mentioned standards.

2.2 FOREIGN CURRENCY TRANSLATION

The financial statements are presented in United States dollars, which is the Bank’s functional and presentation currency.

28
Notes to the Financial Statements, Continued

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-
end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement.
Translation differences on non-monetary items, such as equities held at fair value through profit and loss, are reported as part of the
fair-value gain or loss.

2.3 DERIVATIVE FINANCIAL INSTRUMENTS

Derivatives are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently
remeasured at their fair value. Fair values are obtained from quoted market prices in active markets by analyzing recent market
transactions and also from valuation techniques, such as discounted cash-flow models and options-pricing models, as appropriate.
All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.

The best evidence of the fair value of a derivative at initial recognition is the transaction price (i.e., the fair value of the consideration
given or received) unless the fair value of the instrument is evidenced by comparison with other observable current market
transactions in the same instrument (i.e., without modification or repackaging) or based on a valuation technique whose variables
include only data from observable markets. When such evidence exists, the Bank recognizes profits on day one.

The Bank uses the following derivative instruments and strategies for hedging and non-hedging purposes:

Financial futures contracts represent commitments to buy and sell underlying financial instruments in the future and are accounted for
on a recognition and specific identity basis.

Forward foreign exchange contracts are agreements to buy or sell fixed amounts of currency at agreed rates of exchange on specific
future dates.

Cross-currency swaps are agreements to exchange and, on termination of the swap, re-exchange principal amounts denominated in
different currencies. Cross-currency swaps may involve the exchange of interest payments in one specified currency for interest
payments in another specified currency for specified periods.

A currency option gives the buyer the right, but not the obligation, to buy or sell specified amounts of currency at agreed rates of
exchange on or before a specified future date.

Interest-rate futures are typically exchange-traded documents to buy or sell a standard amount of a specified fixed-income security or
time deposit at an agreed interest rate on a standard date.

A forward rate agreement gives the buyer the ability to determine the underlying rate of interest for a specified holding period
commencing on a specified future date. There is no exchange of principal, and settlement is effected on the settlement date. The
settlement amount is calculated by reference to the difference between the contract rate and the market rate prevailing on the
settlement date.

Interest-rate options give the buyer the right, but not the obligation, to fix the rate of interest on a future deposit or loan for a
specified period and commencing on a specified future date.

Interest-rate caps and floors give the buyer the ability to fix the maximum or minimum rate of interest. There is no facility to deposit
or draw down funds; instead the writer pays to the buyer the amount by which the market rate exceeds or falls short of the cap rate or
the floor rate respectively. A combination of an interest-rate cap and floor is known as an interest-rate collar.

Equities options give the buyer the right, but not the obligation, to buy or sell specified amounts of equities or a basket of equities in
the form of published indices.

2.4 INTEREST INCOME AND EXPENSE

Interest income and expense are recognized in the income statement for all instruments measured at amortized cost using the
effective interest method.

29
Notes to the Financial Statements, Continued

The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability and of allocating
the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, through a
shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the
Bank estimates cash flows by considering all contractual terms of the financial instrument (for example, prepayment options) but does
not consider future credit losses. The calculation includes all fees and points that are an integral part of the effective interest rate,
transaction costs and all other premiums or discounts that have been paid or received between parties to the contract.

Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is
recognized using the rate of interest utilized to discount the future cash flows for the purpose of measuring the impairment loss.

2.5 FEE INCOME

Commission and fees arising from negotiating, or participating in the negotiation of, a transaction for a third party — such as the
arrangement of the acquisition of shares or other securities or the purchase or sale of businesses — are recognized on completion of
the underlying transaction. Portfolio and other management advisory and service fees are recognized based on the applicable service
contracts, usually on a time-apportionable basis. Asset management fees related to investment funds are recognized ratably over the
period the service is provided. The same principle is applied to wealth management, financial planning and custody services that are
continuously provided over an extended period of time.

2.6 INSURANCE
The insurance coverage of the Bank includes Property and Casualty, Worldwide Package, Vehicle, Workers’ Compensation and Travel
Accident coverage. Financial coverage includes Banker’s Blanket Bond, Directors’ and Officers’ Liability, and Errors and Omissions
Liability. The Bank also maintains Depository Insolvency coverage for its correspondent banks.

The Bank’s insurance program is independently reviewed. The latest review was performed by Stogniew & Associates, an independent
risk management consultant. The primary objective of each review is to provide assurance that the risk management and internal
controls currently implemented minimize the Bank’s exposure to loss. The most recent assessment stated that the Bank had
reasonable internal controls and risk management systems in place and found no material weaknesses in these areas.

2.7 FINANCIAL ASSETS

The Bank classifies its financial assets in the following categories: financial assets at fair value through profit or loss; loans and
receivables; held-to-maturity investments; and available-for-sale financial assets. Management determines the classification of its
investments at initial recognition.

Financial assets at fair value through profit or loss has two subcategories: financial assets held for trading, and those designated at
fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of
selling in the short term or if so designated by management. Derivatives are also categorized as held for trading unless they are
designated as hedges.

Purchases and sales of financial assets at fair value through profit or loss are recognized on trade-date — the date on which the Bank
commits to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash flows from the financial
assets have expired or where the Bank has transferred substantially all risks and rewards of ownership.

Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Gains
and losses arising from changes in the fair value of the “financial assets at fair value through profit or loss” category are included in
the income statement in the period in which they arise. Interest calculated using the effective interest method is recognized in the
income statement.

The fair values of quoted investments in active markets are based on current bid prices. If the market for a financial asset is not active
(for unlisted securities), the Bank establishes fair value by using valuation techniques. These include recent arm’s-length transactions,
discounted cash flow, option pricing models and other valuation techniques commonly utilized by market participants.

2.8 IMPAIRMENT OF FINANCIAL ASSETS

(a) Assets carried at amortized cost

The Bank assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is
impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred if and only if there is

30
Notes to the Financial Statements, Continued

objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss
event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial
assets that can be reliably estimated. Objective evidence that a financial asset or group of assets is impaired includes observable data
that comes to the attention of the Bank about the following loss events:

(i) significant financial difficulty of the issuer or obligor;

(ii) a breach of contract, such as a default or delinquency in interest or principal payments;
(iii) the Bank granting to the borrower, for economic or legal reasons relating to the borrower’s financial difficulty, a concession that
the lender would not otherwise consider;
(iv) the growing probability that the borrower will enter bankruptcy or other financial reorganization;
(v) the disappearance of an active market for that financial asset because of financial difficulties; or
(vi) observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial
assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial
assets in the group, including:
a. adverse changes in the payment status of borrowers in the group; or
b. national or local economic conditions that correlate with defaults on the assets in the group.

The Bank first assesses whether objective evidence of impairment exists individually for financial assets that are individually
significant, and then individually or collectively for financial assets that are not individually significant. If the Bank determines that no
objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in
a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are
individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective
assessment of impairment.

If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortized
cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the
asset is reduced through the use of an allowance account and the amount of the loss is recognized in the income statement. As a
practical expedient, the Bank may measure impairment on the basis of an instrument’s fair value using an observable market price.
The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that
may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.

For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics
(i.e., on the basis of the Bank’s grading process that considers asset type, industry, geographical location, collateral type, past-due
status and other relevant factors). Those characteristics are relevant to the estimation of future cash flows for groups of such assets by
being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated. Future
cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual
cash flows of the assets in the Bank and historical loss experience for assets with credit risk characteristics similar to those in the
Bank. Historical loss experience is adjusted on the basis of current observable data and to reflect the effects of current conditions
that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the
historical period that do not exist currently.

Estimates of changes in future cash flows for groups of assets should reflect and be directionally consistent with changes in related
observable data from period to period (for example, changes in unemployment rates, property prices, payment status and other
factors indicative of changes — and their magnitude — in the probability of losses in the group). The methodology and assumptions
used for estimating future cash flows are reviewed regularly by the Bank to reduce any differences between loss estimates and
actual loss experience.

(b) Assets carried at fair value

The Bank assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets
is impaired. Impairment losses recognized in the income statement on equity instruments are not reversed through the income statement.

2.9 LOANS AND ADVANCES TO CLIENTS

Stanford International Bank does not expose its clients to the risks associated with commercial loans. The Bank’s only form of lending
is done on a cash-secured basis solely to existing clients. Loans and advances to clients are permitted up to 80 percent of deposits
maintained by the client at the Bank. The deposits serve as guarantee to the loan and therefore, no additional provision is needed
to support a potential loan loss.

31
Notes to the Financial Statements, Continued

2.10 PROPERTY AND EQUIPMENT

Property and equipment includes land and buildings and is comprised mainly of offices. All property and equipment is stated at
historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or are recognized as a separate asset. All other repairs and maintenance
are charged to the income statement during the financial period in which they are incurred.

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their costs to their
residual values over their estimated useful lives, as follows:

- Buildings 20 years
- Leasehold Improvements 20 years, or over the period of the lease if less than 20 years
- Computer Equipment 5 years
- Furniture and Equipment 3-8 years
- Motor Vehicles 5 years

The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at each balance sheet date. Assets that are
subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to
sell and value in use. Gains and losses on disposals are determined by comparing proceeds with the carrying amounts. These
are included in the income statement.

2.11 LEASES
The leases entered into by the Bank are primarily operating leases for office space and equipment. Payments made by the Bank under
operating leases are charged to the income statement on a straight-line basis as defined in the lease agreements in effect for the
period. If an operating lease is terminated before the lease period has expired, any payment required to be made by the Bank as a
penalty is recognized as an expense in the period in which termination takes place.

Income from leases received by the Bank is recorded as rental income in the other income section of the income statement and is not
part of the normal business of the Bank.

2.12 CASH AND CASH EQUIVALENTS

For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than three months’ maturity from
the date of acquisition, including: cash and nonrestricted balances with central banks, treasury bills and other eligible bills; loans and
advances to banks; amounts due from other banks; and short-term government securities.

2.13 SHARE CAPITAL

(a) Ordinary Shares

All authorized shares have been issued, fully paid and carry a par value of $100 per share.

(b) Share Premium

Contributions made by the shareholder in excess of the par value of the issued capital.

(c) Dividends
No dividends have been authorized or distributed. All excess earnings have been reinvested into the Bank.

2.14 COMPARATIVES
Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.

32
Notes to the Financial Statements, Continued

NOTE 3 - FINANCIAL RISK MANAGEMENT

3.1 STRATEGY IN USING FINANCIAL INSTRUMENTS

As a banking company, the strategy of the Bank is to efficiently manage assets and liabilities. In this process, assets primarily
consist of securities and, to a lesser degree, clients’ credits that are matched in premium and timing. The Bank’s assets are invested
in a well-balanced global portfolio of marketable financial instruments, namely U.S. and international securities and fiduciary placements.

The Bank’s investment portfolio maintains a stable and well-balanced structure due to a high proportion of fixed-income investments
and a diversified investment advisory network resulting in an optimum diversification process. There is a policy of maintaining
sufficient liquidity, thus protecting longer-term investments with significant returns.

3.2 CREDIT RISK

The Bank takes on exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due.
Significant changes in the economy, or in the health of a particular industry segment that represents a concentration in the Bank’s
portfolio, could result in losses that are different from those provided for at the balance sheet date. Management therefore carefully
manages its exposure to credit risk.

The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one
borrower, or groups of borrowers, and to geographical and industry segments. Such risks are monitored on a revolving basis and
are subject to weekly review. Limits on the level of credit risk by product, by industry sector and by country are approved
quarterly by the board of directors.

(a) Derivatives
The Bank maintains strict control limits on net open derivative positions (i.e., the difference between purchase and sale contracts),
by both amount and term. At any one time, the amount subject to credit risk is limited to the current fair value of instruments
that are favorable to the Bank (i.e., assets where their fair value is positive), which in relation to derivatives is only a small
fraction of the contract, or notional values used to express the volume of instruments outstanding. This credit risk exposure is
managed as part of the overall exposures from market movements. Collateral or other security is not usually obtained for credit
risk exposures on these instruments.

(b) Credit-Related Commitments

The primary purpose of these instruments is to ensure that funds are available to a client as required. Guarantees and standby
letters of credit — which represent irrevocable assurances that the Bank will make payments in the event that a client cannot meet
its obligations to third parties — carry the same credit risk as loans. Documentary and commercial letters of credit — which are written
undertakings by the Bank on behalf of a client authorizing a third party to draw drafts on the Bank up to a stipulated amount under
specific terms and conditions — are generally collateralized by compensating cash balances to which they relate and therefore carry
less risk than a direct borrowing. Commitments to extend credit represent unused portions of authorizations to extend credit in the
form of loans, guarantees or letters of credit.

3.3 GEOGRAPHICAL CONCENTRATIONS OF ASSETS, LIABILITIES AND OFF-BALANCE SHEET ITEMS

The Bank has a global investment strategy, which ensures that rates are not directly affected by prevailing rates in any single
market. The Bank’s assets consist of established, quality companies, governments and agencies from around the world. The
portfolio investments are leaders in particular fields, financially strong with demonstrated consistency in earnings. We invest in
companies, governments and agencies whose managements have proven demonstrated ability. Investments favored are those
with global diversification.

Antigua and Barbuda, West Indies, is the Bank’s domicile. The Bank has also maintained a representative office in Montreal, Canada,
since December 2004. The Bank has more than 35,000 depositors and clients from 102 countries. The Bank’s certificates of deposit and
other investment accounts are primarily denominated in U.S. dollars, British pounds/sterling, euros and Canadian dollars.

3.4 MARKET RISK

Capital preservation and steady annual flow of revenues is a specific objective of the portfolio. This objective is met by the investment
methodology that pursues a minimization of risk (both systematically and unsystematically), liquidity (marketability), portfolio
efficiency (highest return/minimum risk), operational flexibility, and absolute — as opposed to index-linked — yields on investment. Risk
is monitored and managed on a day-to-day basis, and a major component of this management is to remain widely diversified on an
international scale. This objective is met through diversification in asset classes (debt, equity, cash and hard assets), economic

33
Notes to the Financial Statements, Continued

sectors (health, financials, energy, etc.), issuers (governments, multinationals, commercial banks, etc.), currencies (U.S. dollars, Swiss
francs, Japanese yen, euros and other currencies), and geographical areas (United States, Switzerland, England, France, Austria,
Australia, Asia/Pacific Rim, etc.). Furthermore, the Bank’s investment policy specifies selling limits at 7 percent to 8 percent on the
downside for equity holdings and monitors historical statistical information for diversified investments, such as funds, for exposure to risk.

3.5 CURRENCY RISK

The Bank takes on exposure to effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and
cash flows. The table below summarizes the Bank’s exposure to foreign currency exchange rate risk at 31 December. Included in the
table are the Bank’s assets and liabilities at carrying amounts, categorized by currency.

CONCENTRATIONS OF ASSETS, LIABILITIES AND OFF-BALANCE SHEET ITEMS

AT 31 DECEMBER 2005 US$ € £ ¥ CD$ & Other TOTAL

ASSETS
Cash and Deposits with
Other Banks $ 176,440,119 $ 65,822,937 $ 12,323,545 $ 0 $ 2,888,333 $ 257,474,934
Financial Assets at Fair Value 2,176,025,365 326,298,418 245,608,246 271,972,012 733,861,064 3,753,765,105
Loans and Advances to Clients 37,883,935 564,913 0 0 0 38,448,848
Property and Equipment 4,599,287 0 0 0 0 4,599,287
Other Assets 4,816,763 0 0 0 8,850 4,825,613
TOTAL ASSETS $ 2,399,765,469 $ 392,686,268 $ 257,931,791 $ 271,972,012 $ 736,758,247 $ 4,059,113,787

LIABILITIES
Deposits from Clients 3,604,026,524 126,831,157 27,984,808 0 4,168,551 3,763,011,040
Other Liabilities and Provisions 13,604,368 0 0 0 44,549 13,648,917
TOTAL LIABILITIES $ 3,617,630,892 $ 126,831,157 $ 27,984,808 $ 0 $ 4,213,100 $ 3,776,659,957

NET ON-BALANCE SHEET POSITION $ (1,217,865,423) $ 265,855,111 $ 229,946,983 $ 271,972,012 $ 732,545,147 $ 282,453,830
Credit Commitment 28,365,441 0 0 0 0 28,365,441

AT 31 DECEMBER 2004
Total Assets 1,281,614,431 429,114,258 319,381,753 413,242,313 643,068,705 3,086,421,460
Total Liabilities 2,761,932,295 68,335,318 2,284,432 26,752 7,300,067 2,839,878,864
NET ON-BALANCE SHEET POSITION $ (1,480,317,864) $ 360,778,940 $ 317,097,321 $ 413,215,561 $ 635,768,638 $ 246,542,596
Credit Commitments 12,851,598 0 0 0 0 12,851,598

34
Notes to the Financial Statements, Continued

3.6 CASH FLOW AND FAIR VALUE INTEREST RATE RISK

Cash flow and fair value interest rate risk is the risk that future cash flows of a financial instrument will fluctuate due to changes in
market interest rates. The Bank takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on
both its fair value and cash flow risks. The system of global interest rate risk monitoring rests almost solely on two points. Firstly,
depositor payables in the form of fixed income products are paid a minimum interest rate that for the past two decades has ensured
extremely low volatility and accounted for an incredible deposit base growth rate. Secondly, on the asset side, modern securities
portfolio management systems are utilized and spread across multiple portfolio managers in several countries. The board monitors
interest rates on a quarterly basis.

3.7 LIQUIDITY RISK

The Bank is exposed to daily calls on its available cash resources from maturing deposits, current accounts and other drawdowns. The
Bank monitors client account maturities on the daily management report. Then based on this information, the treasury department
ensures short-term deposits are made accordingly in laddered fiduciary or overnight deposits as deemed appropriate to cover liquidity
needs. The board sets limits on the minimum percentage of cash and cash-in-kind assets and liquidity to cover withdrawals at
unexpected levels of demand.

Assets primarily consist of securities and, to a lesser degree, client credits that are matched in premium and timing. It is unusual
for banks to be completely matched due to terms and types of products. An unmatched position potentially enhances profitability, but
may increase the risk of losses.

The maturities of assets and liabilities, and the ability to replace liabilities as they mature, are important factors for assessing the
liquidity of the Bank and its exposure to changes in interest rates and exchange rates.

Liquidity requirements to support calls under guarantees and standby letters of credit are considerably less than the amount of the
commitment because the Bank does not generally expect the third party to draw funds under the agreement. The total outstanding
contractual amount of commitments to extend credit does not necessarily represent future cash requirements, as many of these
commitments will expire or terminate without being funded.

35
Notes to the Financial Statements, Continued

AT 31 DECEMBER 2005 Up to 1-3 3-6 6 - 12 Over 12 Non-Interest Total

1 month months months months months Bearing
ASSETS
Cash and Central Bank Balances $ 256,474,934 $ 0 $ 0 $ 0 $ 0 $ 1,000,000 $ 257,474,934
Financial Assets at Fair Value 2,880,986,854 127,879,646 135,287,645 118,826,301 490,784,659 0 3,753,765,105
Loans and Advances to Clients 4,924,130 3,741,243 5,975,147 5,642,781 18,165,547 0 38,448,848
Property and Equipment 0 0 0 0 0 4,599,287 4,599,287
Other Assets 0 0 0 0 0 4,825,613 4,825,613
TOTAL ASSETS $ 3,142,385,918 $ 131,620,889 $ 141,262,792 $ 124,469,082 $ 508,950,206 $ 10,424,900 $ 4,059,113,787

LIABILITIES
Deposits from Clients 350,424,991 363,905,085 264,954,590 869,696,365 1,914,030,009 0 3,763,011,040
Other Liabilities 0 0 0 0 0 13,648,917 13,648,917
TOTAL LIABILITIES $ 350,424,991 $ 363,905,085 $ 264,954,590 $ 869,696,365 $ 1,914,030,009 $ 13,648,917 $ 3,776,659,957

NET LIQUIDITY GAP $ 2,791,960,927 $ (232,284,196) $ (123,691,798) $ (745,227,283) $ (1,405,079,803) $ (3,224,017) $ 282,453,830

AT 31 DECEMBER 2004
Total Assets $ 2,170,965,701 $ 92,684,538 $ 13,144,763 $ 182,240,727 $ 615,078,194 $ 12,307,537 $ 3,086,421,460
Total Liabilities 298,470,972 299,918,035 146,455,038 764,007,189 1,319,090,259 11,937,371 2,839,878,864

NET LIQUIDITY GAP $ 1,872,494,729 $ (207,233,497) $ (133,310,275) $ (581,766,462) $ (704,012,065) $ 370,166 $ 246,542,596

36
Notes to the Financial Statements, Continued

NOTE 4 - CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.

4.1 FAIR VALUES OF DERIVATIVES

The fair values of financial instruments that are not quoted in active markets are determined by using valuation techniques. Where
valuation techniques (for example, models) are used to determine fair values, they are validated and periodically reviewed by qualified
personnel independent of the area that created them. All models are certified before they are used, and models are calibrated to
ensure that outputs reflect actual data and comparative market prices. To the extent practical, models use only observable data;
however areas such as credit risk (both own and counterparty), volatilities and correlations require management to make estimates.
Changes in assumptions about these factors could affect reported fair values of financial instruments.

4.2 INCOME TAX

The Bank has made no provisions for income tax against earnings pursuant to the Banking Act of 1969 (as revised). As a company
formed under the International Business Corporations Act of 1982, the Bank is exempt from all direct taxes with respect to any
international trading, investment or commercial activity, including withholding taxes and stamp duties.

4.3 LEGAL ACTIONS

At this time, there is no significant pending legal activity. In the normal course of business, the Bank is subject to legal actions. The
Bank is not able to predict whether or not there will be an adverse effect on results of operations in a particular future period.

37
Notes to the Financial Statements, Continued

NOTE 5 - NET INVESTMENT INCOME

2005 2004

Equities $ 135,299,924 $ 76,061,655

Fixed Income 62,834,588 71,462,682
Fiduciary 16,315,665 11,630,822
Alternative 80,917,973 79,977,202
Precious Metals 43,827,305 38,127,716
TOTAL (see Figures 8 and 9) $ 339,195,455 $ 277,260,077

Figure 9. INVESTMENT INCOME

Precious Metals 12.9% Fixed Income 18.5%

Alternative 23.9%

Equities 39.9%

Fiduciary 4.8%
Figure 8. INVESTMENT INCOME
Dollars (in millions)

140 135

120

100
80 81
80 76
71
63
62
60
49 47
44
40 38
30
20 16
11 12

0
Equities Fixed Income Fiduciary Alternative Precious
Metals
2003 2004 2005

38
Notes to the Financial Statements, Continued

NOTE 6 - NET INTEREST INCOME/(EXPENSE)

2005 2004
INTEREST INCOME
Cash and Short-Term Funds $ 5,721,489 $ 1,273,448
Investment Securities 77,030,533 53,306,560
Loans and Advances 3,531,935 2,197,481
TOTAL (see Figure 10) $ 86,283,957 $ 56,777,489

INTEREST EXPENSE
Banks and Clients 220,791,640 161,677,476
TOTAL (see Figure 11) $ 220,791,640 $ 161,677,476

NET INTEREST INCOME/(EXPENSE) $ (134,507,683) $ (104,899,987)

Figure 10. INTEREST INCOME Figure 11. INTEREST EXPENSE

Dollars (in millions) Dollars (in millions)

100 250

90 86 225 221

80 200

70 175
162
60 57 150
55 134
50 125

40 100

30 75

20 50

10 25

0 0
2003 2004 2005 2003 2004 2005

39
Notes to the Financial Statements, Continued

NOTE 7 - NET FEE INCOME/(EXPENSE)

2005 2004
FEE INCOME
Loan Processing Fees $ 37,650 $ 40,048
Early Withdrawal Fees 1,192,481 696,549
TOTAL $ 1,230,131 $ 736,597

FEE EXPENSE
Bank Fees 349,616 281,309
Commissions 250,083 187,705
Credit Card Losses 132,068 40,492
Miscellaneous Fees 76,720 61,649
Referral Fees 87,827,022 63,756,447
TOTAL $ 88,635,509 $ 64,327,602

NET FEE INCOME/(EXPENSE) $ (87,405,378) $ (63,591,005)

Referral fees are paid to Stanford Group Company, Stanford Trust Company Limited and Stanford Group (Antigua) Limited. The fees are a
percentage of the managed client portfolio and are negotiated annually.

NOTE 8 - OTHER INCOME

Gain/(Loss) on Foreign Exchange $ 5,015,900 $ (2,936,065)

Gain/(Loss) on Disposal of Fixed Assets (57,894) 0
Rental Income 37,037 37,037
Miscellaneous Income 26,100 14,597
TOTAL $ 5,021,143 $ (2,884,431)

40
Notes to the Financial Statements, Continued

NOTE 9 - PERSONNEL EXPENSES

2005 2004

Wages and Salaries $ 2,042,107 $ 1,689,880

Company Portion of Payroll Taxes 97,762 197,843
Employee Insurance 81,460 60,006
Employee Benefits 223,019 105,257
Personnel Recruitment, Training and Education 15,833 46,437
TOTAL $ 2,460,181 $ 2,099,423

Average Number of Employees During the Year 58 55

NOTE 10 - GENERAL AND ADMINISTRATIVE EXPENSES

Rent and Maintenance of Offices and Equipment $ 1,231,616 $ 1,093,264

Telephone, Telex and Fax 869,770 631,874
Mail and Delivery Services 1,099,346 917,213
Advertising and Promotion 816,825 843,892
Travel and Accommodations 740,079 734,408
Insurance 1,525,942 1,166,520
Management Fees (see Figure 12) 74,534,656 59,443,130
Directors’ Emoluments 90,000 90,000
Information Technology 266,295 288,275
Professional Fees 929,399 681,996
Audit Fees 69,900 66,000
Other General and Administrative Expenses 855,863 735,201
TOTAL $ 83,029,691 $ 66,691,773

Management fees consist of expenses related to the marketing and service agreement in place with Stanford Financial Group Company. These
services include treasury-related functions, establishing and implementing trading policy, client communications, research, marketing and
branding, government and public relations, technology and other related administrative services. The service agreement is negotiated annually
and was renewed for the year 2005 on 29 December 2004.

Figure 12. MANAGEMENT FEES

Market Research 12.2%

Administrative 14.8%

Trading Policy 5.9%

Treasury 4.2%

Professional Services 2.4%

Government and
Public Relations 15.5% Technology 1.5%

Communications &
Branding 43.5%

41
Notes to the Financial Statements, Continued

NOTE 11 - CASH AND BALANCES WITH OTHER BANKS

2005 2004

Included in Cash and Cash Equivalents $ 256,474,934 $ 197,704,189

Mandatory Reserve Deposits Placed with Local Entities 1,000,000 1,000,000
TOTAL $ 257,474,934 $ 198,704,189

Mandatory reserve deposits are not available for use in the Bank’s day-to-day operations.

NOTE 12 - FINANCIAL ASSETS AT FAIR VALUE

Equity $ 2,060,889,097 $ 1,013,170,689

Fixed Income 873,454,030 912,513,034
Fiduciary 38,650,123 6,885,363
Alternative 277,351,245 472,556,474
Precious Metals 503,420,610 441,941,393
TOTAL (see Figure 13 and 14) $ 3,753,765,105 $ 2,847,066,953

Figure 13. FINANCIAL ASSETS Figure 14. TOTAL FINANCIAL ASSETS

Dollars (in billions)

Precious Metals 13.4%

4.0 3.8

3.5
Alternative 7.4%
3.0 2.8
Fiduciary 1.0%
2.5
2.1
2.0
Equity 54.9%
1.5
Fixed Income 23.3%

1.0

0.5

0
2003 2004 2005

42
Notes to the Financial Statements, Continued

NOTE 13 - LOANS AND ADVANCES TO CLIENTS

2005 2004

Loan Principal $ 36,558,681 $ 27,064,604

Accrued Interest on Loans 1,890,167 1,278,176
TOTAL (see Figure 15) $ 38,448,848 $ 28,342,780

BY CLIENT TYPE (see Figure 16)

Corporate 16,682,931 10,582,282
Private 21,765,917 17,760,498
TOTAL $ 38,448,848 $ 28,342,780

BY GEOGRAPHIC REGION (see Figure 17)

North America 1,537,155 1,155,031
Central America 15,833,358 10,860,429
South America 13,557,847 10,363,774
Caribbean 7,418,024 5,871,832
Other 102,464 91,714
TOTAL $ 38,448,848 $ 28,342,780

BY TYPE OF COLLATERAL
Cash Deposit Guarantees $ 38,448,848 $ 28,342,780

Figure 16. CLIENT LOANS BY TYPE

Corporate 43.4%
Figure 15. LOANS AND ADVANCES
Dollars (in millions)

Private 56.6%
40.0 38

35.0

30.0 28

25.0 24

Figure 17. CLIENT LOANS BY REGION

20.0

North America 4.0%

15.0 Central America 41.1%
Other 0.3%
10.0

5.0 Caribbean 19.3%

0.0
2003 2004 2005

South America 35.3%

43
Notes to the Financial Statements, Continued

NOTE 14 - PROPERTY AND EQUIPMENT

Land, Building and Computer and Furniture and

Leasehold Software Equipment Motor Vehicles Artwork WIP Total
HISTORICAL COST
At 31 December 2004 $ 7,533,239 $ 2,431,340 $ 1,052,072 $ 502,418 $ 56,786 $ 237,098 $ 11,812,953
Additions 58,675 38,176 221,932 63,519 15,833 0 398,135
Disposals and Write-Offs (2,063,460) 0 0 (19,771) 0 (21,980) (2,105,211)
AT 31 DECEMBER 2005 $ 5,528,454 $ 2,469,516 $ 1,274,004 $ 546,166 $ 72,619 $ 215,118 $ 10,105,877

DEPRECIATION
At 31 December 2004 $ 2,993,655 $ 1,048,211 $ 309,113 $ 265,043 $ 0 $ 0 $ 4,616,022
Additions 255,033 478,215 81,280 87,903 0 0 902,431
Disposals and Write-Offs 0 0 0 (11,863) 0 0 (11,863)
AT 31 DECEMBER 2005 $ 3,248,688 $ 1,526,426 $ 390,393 $ 341,083 $ 0 $ 0 $ 5,506,590

CARRYING AMOUNT 31 DECEMBER 2005 $ 2,279,766 $ 943,090 $ 883,611 $ 205,083 $ 72,619 $ 215,118 $ 4,599,287
CARRYING AMOUNT 31 DECEMBER 2004 $ 4,539,584 $ 1,383,129 $ 742,959 $ 237,375 $ 56,786 $ 237,098 $ 7,196,931

NOTE 15 - OTHER ASSETS

2005 2004

Accounts Receivable $ 28,614 $ 39,440

Prepayments 4,751,559 4,984,056
Other Assets 45,440 87,111
TOTAL $ 4,825,613 $ 5,110,607

Figure 18. PROPERTY AND EQUIPMENT Figure 19. PROPERTY AND EQUIPMENT
Dollars (in millions)

8.0 Computer and

Software 20.5%
7.2
7.0

6.0 5.6
Land,
5.0 Building and
4.6 Leasehold 49.5%
4.0
Furniture
and Equipment 19.2%
3.0

2.0

1.0 Motor Vehicles 4.5%

Artwork 1.6% WIP 4.7%
0.0
2003 2004 2005

44
Notes to the Financial Statements, Continued

NOTE 16 - DEPOSITS FROM CLIENTS

Express Accounts
Funds from these accounts are generally invested in short-term instruments, euros and foreign currency deposits.

Performance Accounts
Funds from these accounts are generally invested in investment-grade bonds, securities, euros and foreign currency deposits.

Certificates of Deposit
The certificates of deposit accounts guarantee payment of the stated interest rate until maturity. Funds from these accounts are generally
invested in investment-grade bonds, securities, euros and foreign currency deposits.
sm
FlexCD — A certificate of deposit that accepts additional deposits and withdrawals (up to 25 percent of the balance and a maximum of four
per year) without incurring early withdrawal penalties or additional fees. This product is available in most international currencies.
sm
FixedCD — A certificate of deposit that does not accept additional deposits and withdrawals are subject to early withdrawal penalties. This
product is available in most international currencies.

Index-Linked Certificate of Deposit (ILCD) — A certificate of deposit that is linked to the performance of either the S&P 500 Index, NASDAQ 100
Index or the Dow Jones Euro STOXX 50 Index. At term end, the depositor receives the initial amount invested plus a fixed interest rate or an index
participation rate, whichever is greater. This product does not renew automatically, is only available in U.S. dollars and withdrawals are subject to
an early withdrawal penalty.

2005 2004

Express Accounts $ 97,613,569 $ 70,939,561

Performance Accounts 3,082,629 9,978,792
FlexCD 1,308,873,718 1,147,372,220
FixedCD 2,336,260,265 1,581,825,058
Index-Linked Certificate of Deposit (ILCD) 17,180,859 17,825,862
TOTAL (see Figures 20 and 21) $ 3,763,011,040 $ 2,827,941,493

Figure 20. CERTIFICATES OF DEPOSIT

AND CLIENT DEPOSITS Figure 21. CERTIFICATES OF DEPOSIT
Dollars (in billions)

ILCD 0.5%
4.0 3.7 3.8

3.5

FlexCD 35.7%
3.0 2.7 2.8

2.5

2.0 2.0 2.1

1.5

1.0
FixedCD 63.8%

0.5

0.0
2003 2004 2005

Certificates of Deposit Client Deposits

45
Notes to the Financial Statements, Continued

2005 2004
ACCRUED INTEREST COMPONENT OF CLIENT DEPOSITS AT 31 DECEMBER WERE:
Express Accounts $ 12,833 $ 6,453
Performance Accounts 1,729 (213)
FlexCD 52,441,421 45,023,520
FixedCD 103,904,483 58,319,398
Index-Linked Certificates of Deposit 1,225,722 976,560
TOTAL $ 157,586,188 $ 104,325,718

DEPOSITS PER ACCOUNT ON AN AVERAGE BASIS:

Express Accounts 75,532,819 53,297,625
Performance Accounts 4,268,211 5,132,174
FlexCD 1,235,855,219 1,100,167,489
FixedCD 1,979,681,187 1,275,046,581
Index-Linked Certificates of Deposit 17,405,538 16,538,447
TOTAL $3,312,742,974 $ 2,450,182,316

NOTE 17 - OTHER LIABILITIES AND PROVISIONS

Accounts Payable Trade $$ 22,909 $ 25,379

Accounts Payable to Related Parties 11,390,789 9,226,126
Other Liabilities 2,235,219 2,685,866
TOTAL $ 13,648,917 $ 11,937,371

NOTE 18 - SHARE CAPITAL AND SHARE PREMIUM

Number of Shares Ordinary Share

Authorized Issued Shares Premium Total

At 31 December 2003 100,000 100,000 $ 10,000,000 $ 28,200,000 $ 38,200,000

Additional Contributions 0 0 0 75,300,000 75,300,000

AT 31 DECEMBER 2004 100,000 100,000 $ 10,000,000 $ 103,500,000 $ 113,500,000

Additional Contributions 0 0 0 0 0

AT 31 DECEMBER 2005 100,000 100,000 $ 10,000,000 $ 103,500,000 $ 113,500,000

All shares have a par value of $100 and have been fully paid.

46
Notes to the Financial Statements, Continued

NOTE 19 - RETAINED EARNINGS

2005 2004
Movements in Retained Earnings Were as Follows:
At 1 January $ 133,042,596 $ 96,828,619
Net Profit for the Year 35,911,234 36,213,977
AT 31 DECEMBER (see Figure 22) $ 168,953,830 $ 133,042,596

NOTE 20 - CONTINGENT LIABILITIES AND COMMITMENTS

Guarantees and Standby Letters of Credit $ 28,365,441 $ 12,851,598

Figure 22. RETAINED EARNINGS

Dollars (in millions)

180

36
160

140
36
133
120

100
33 97
80

64
60

40

20

0.0
2003 2004 2005
Accumulated Earnings Current Year Earnings

47
Notes to the Financial Statements, Continued

NOTE 21 - RELATED-PARTY TRANSACTIONS

The Bank is a member of Stanford Private Wealth Management, a global network of privately held, wholly owned affiliated financial service
companies. Although independent, the affiliated companies together provide coordinated wealth management through international private
banking, asset management, investment advisory services, trust administration, commercial banking and insurance for clients worldwide. Stanford
Private Wealth Management affiliates serve more than 90,000 clients on six continents.

A number of banking transactions are entered into with related parties in the normal course of business. These include, but are not limited to,
loans, deposits and foreign currency transactions. The volumes of related-party transactions, outstanding balances at the year end and related
expenses for the year are as follows:

2005 2004

DEPOSITS AT 31 DECEMBER $ 16,091,836 $ 9,422,911

EXPENSES
Interest on Deposits $ 887,621 $ 412,959
Rent 909,376 848,000
Referral Fees 87,827,022 63,756,447
Management Fees 74,534,656 59,443,130
TOTAL $ 164,158,675 $ 124,460,536

Accounts Receivable Balance at 31 December 28,614 39,440

Accounts Payable Balance at 31 December 11,390,789 9,226,126

A referral fee agreement exists between the Bank and Stanford Group Company, Stanford Trust Company Limited and Stanford Group (Antigua)
Limited. The fee is a percentage of the managed client portfolio of each company and is negotiated annually.

A management fee agreement related to marketing and services exists between the Bank and Stanford Financial Group Company. These services
include treasury-related functions, establishing and implementing trading policy, client communications, research, marketing and branding,
government and public relations, technology and other related administrative services.

All Bank personnel are compensated in the same manner and no special benefits exist for management.

Directors’ Remuneration $ 90,000 $ 90,000

A list of the members of the board of directors is shown on page 52 of this Annual Report.

48
SUPPLEMENTAL INFORMATION: INTERNATIONAL BUSINESS CORPORATION (IBC) ACT DISCLOSURE INFORMATION

Under authority of section 350 of the IBC Act, the Bank is required to disclose the following information as it pertains to the expenses that
impact the national economy of Antigua and Barbuda.

2005 2004
OPERATING EXPENSES (see Figures 23 and 24)
Salaries $ 1,652,470 $ 1,339,370
Other Staff Cost 783,525 726,145
Vehicle Expense 27,315 13,685
Rent 1,105,026 1,085,420
Professional Fees 218,638 79,449
Electricity 90,483 99,412
Telephone/Fax 847,566 613,873
Travel and Entertainment 465,874 362,466
General Office 1,108,528 916,431
Insurance 42,593 81,901
Management Fees — Local 579,251 583,189
Repairs and Maintenance 219,146 231,578
Subscriptions and Donations 94,813 33,443
Licenses and Permits 739,365 100,633
TOTAL$ $ 7,974,593 $ 6,266,995

CAPITAL EXPENSES
Vehicle Purchases $ 63,519 $ 35,148

Figure 23. HEADQUARTERS EXPENSE Figure 24. HEADQUARTERS EXPENSE

Dollars (in millions)

Licenses and Permits 9.3%

9.0
Subscriptions and Donations 1.2%
Salaries 20.8%
8.0 8.0 Repairs and Maintenance 2.7%

Management Fees — Local 7.3%

7.0
6.3 Insurance 0.5%
6.0
5.3
Other
5.0 Staff Cost 9.8%
General Office 13.9%
4.0 Vehicle Expense 0.3%

3.0
Travel and Rent 14.0%
Entertainment 5.8%
2.0
Professional Fees 2.7%
1.0 Telephone/Fax 10.6%
Electricity 1.1%

0.0
2003 2004 2005

49
AUDITORS’ REPORT

We have audited the accompanying balance sheet of Stanford
International Bank Ltd. as at 31 December 2005 and the related
statements of income, changes in shareholder’s equity and
cash flows for the year then ended. These financial statements
are the responsibility of the company’s management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
In our opinion, the financial statements are fair in all material
respects, and they show a true position of the company as at 31
December 2005, and the results of its operations and its cash
flow for the year in accordance with international financial
reporting standards.

We conducted our audit in accordance with international

auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about C. A. S. Hewlett & Co. Ltd.
whether the financial statements are free from material Chartered Accountants
misstatements. An audit includes examining on a test basis, St. Johns Street, St. Johns, Antigua.
evidence supporting the amounts and disclosures in the 28 April 2006
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of
the financial statements. We consider that our audit provides a
reasonable basis for our opinion.

50
REPORT OF MANAGEMENT
The management of Stanford International Bank is responsible for
the preparation, integrity and objectivity of the financial
statements of the Bank. The financial statements and notes have
been prepared by the Bank in accordance with International
Financial Reporting Standards, and in the judgement of
management, present fairly and consistently the Bank’s financial
position and results of operations. The financial statements and
other financial information in this annual report include amounts
that are based on management’s best estimates and judgements
and give due consideration to materiality.
The Bank maintains a system of internal accounting controls to
provide reasonable assurance that assets are safeguarded, and
that transactions are executed in accordance with management’s
authorization and recorded properly to permit the preparation of
financial statements in accordance with International Financial
Reporting Standards. The internal audit function of the Bank
reviews, evaluates, monitors and makes recommendations on
both administrative and accounting controls, which act as an
integral but independent part of the system of internal controls.
The Bank’s independent accountants were engaged to perform
an examination of the financial statements. This examination
provides an objective outside review of management’s
responsibility to report operating results and financial
condition. Working with the Bank’s internal auditors, they review
and make tests, as appropriate, of the data included in the
financial statements.
The board of directors discharges its responsibility for the Bank’s
financial statements through its Audit Committee. The Audit
Committee meets periodically with the independent accountants,
internal auditors and management. Both the independent
accountants and the internal auditors have direct access to the
Audit Committee to discuss the scope and results of their work,
the adequacy of internal accounting controls and the quality of
financial reporting.
R. Allen Stanford
Chairman of the Board
James M. Davis
Director and CFO
51
 BOARD OF DIRECTORS
R. Allen Stanford
Chairman of the Board
James A. Stanford
Chairman Emeritus
James M. Davis
Chief Financial Officer
O.Y. Goswick
Investments
Kenneth C. Allen, Q.C.
Secretary and Treasurer
Sir Courtney N. Blackman, Ph.D.
International Banking
Robert S. Winter
Insurance
52
BANK’S MANAGEMENT SIB REPRESENTATIVE OFFICE
Juan Rodriguez-Tolentino Alain Lapointe
President Senior Vice President
1800 McGill College Ave., Third Floor
Miguel Pacheco Montreal, Quebec, Canada
Senior Vice President
AUDITORS
Michael Zarich
Vice President & C.A.S. Hewlett & Co.
Senior Investment Officer Chartered Accountants
St. John’s Street, St. John’s, Antigua
Eugene Kipper
Vice President INSURANCE AND RISK MANAGERS
Bowen, Miclette & Britt
Beverly M. Jacobs 1111 North Loop West
Operations Manager P.O. Box 922022
Houston, Texas 77292
Bhanoo P. Persaud, ACCA
Accounting Manager Willis Limited
10 Trinity Square
COMPLIANCE London 3C3P 3AX
Pedro E. Rodriguez, CRCM United Kingdom
Vice President &
Senior Compliance Officer BARRISTERS AND SOLICITORS
Hunton & Williams
Barclays Financial Center
1111 Brickell Avenue
Miami, Florida 33131
“Build the business,
step by step, on a firm
foundation of hard
work, clear vision and
value for the client.”
— Lodis Stanford
1932